What is the strike price of an option?

Strike price meaning

The strike price is the price at which the underlying asset of a particular option can be purchased. The strike price is also known as the purchase price or exercise price. In the case of a call option, this is the price at which the underlying asset can be bought, while in the case of a put option, it is the price at which the underlying asset can be sold.

In the case of a call option, strike prices that are below the market price are referred to as ITM (in the money), while strike prices that are above the market price are referred to as OTM (out of the money).

In the case of a put option, strike prices that are below the market price are referred to as OTM (out of the money), while strike prices that are above the market price are referred to as ITM (in the money).

The difference between the strike price and the price of the underlying asset determines whether an option is "in-the-money" or "out-of-the-money"

In-the-money (ITM) options have an intrinsic value because their strike price is lower than the market price for a call option or higher than the market price for a put option.

Strike price vs spot price.

The strike price is the purchase price of the option, which derives its value from an underlying asset.

The spot price, on the other hand, refers to the price of the underlying itself.